What’s wrong with Medical Spa Franchises and Medspa Consultants?

/

We receive numerous inquiries and questions along the lines of: "Should I hire a consultant? Which one? How can I check their reputation/references? Is this franchise a good one? etc.etc.etc." We're not looking to flame anyone in particular but there is obviously a problem with what's currently going on, and what expectations are and should be. The fact that there are so many posts from unhappy medical spa franchises and doctors unhappy with consultants points to a problem. So...

What’s wrong with Medical Spa Franchises and Medspa Consultants?

 

This post is should not be construed as an indictment of any individual or specific business but as an opinion about why certain conditions exist in this market.

Most doctors who are running medspas don’t have a great deal of business savvy and are bumping along from one rail to the other trying to find a way to the gravy train. The truth is that most medical spas don’t really make that much money. (By 'much money' I mean what they think they’re going to be making.)

Why? There are a number of reasons. Mostly it’s because there is still a disconnect between medicine, and the business of medicine. Doctors usually want to “do” medicine, but the business keeps getting in the way. They don’t like doing it and are not’t particularly good at it anyway. They bump along in one direction until they hit an obstacle and then, zip, off they go in another.

An example: Obese patient comes in for hair removal on his back. Patient takes twice as long to treat. Staff tells doctor the treatment took twice as long as scheduled. Doctor decides that he’s lost money so, on the spot decides that he’ll now charge by the minute because he's not going to loose money on a treatment. True story. For a service industry this is tantamount to declaring war on your patients. It's just not good business sense.

Not that docs have it easy. A doctors office is an endless stream of people walking in with their hands out. Pharmaceutical reps, yellow pages sales guys, radio, etc ad nausea.

Doctors are split between something they’re good at and trained to do, and something they don’t like and really know nothing about. It’s know wonder they end up looking for something that promises to hold their hand and walk them to the promised land of endless, high-revenue, happy patients beating their door down.

Here enters the “spa consultants” and medical spa franchises sales guys. These can-do types look you straight in the eye and let you know that they have the secret sauce that will turn your humble abode into the big house on the hill. They come armed with a stack of success stories, nice shoes, and impressive client lists.

But if you pull back the curtain you will find these guys peddling fast. The simple truth is that real medical spa consultants own or run real, operating medical spas and medical spa franchises are in the business of selling medical spa franchises.

Medical Spa Consultants: The medical spa craze has these guys springing up like weeds in spring. Most of these self titled medspa gurus used to own or run a spa until they realized you can’t make money doing that. The average “spa” in the US ends up with about 6% net margins if it’s making any money at all. (The average physicians net margins are 50-60%.) These ‘medspa consultants’ figured out early that they could make a lot more money telling people how to run their business than actually running a business. Do the math. If a medical spa consultant could actually make as much money as they're claiming that they can help you make, they’d be running their own medical spas. Instead, they spring into action with the unsure start-up. The pitch comes with lots of emphatic direction, hints of inside knowledge about retail display, scripts that let your staff know exactly what to say, and the ever popular “up-sell”. (But I digress.)

Medical spas are a business and they operate according the same business principals as any business. You have to take in more money than is going out. If you want to end up rich, you have to take in a lot more money than is going out. The way you’re going to do that is what a medical spa consultant should be telling you. What you really get is handful of prepackaged, one-size-fits-all info that puts all of the onus on you.

Medical Spa Franchises: While franchising is a time-tested business model, I have serious reservations about the current crop of medical spa franchises that are springing up around the country. There are some benchmarks that you should examine before you make a decision as to whether you’re better of as part of a medspa franchise or go the road by yourself. Franchising is a preferred method for businesses that want to grow using other peoples money. While there’s nothing wrong with this it should be a wake up call and enter into any arrangement with your eyes open. The money they’re using to grow the business is yours.

(Let me make another note about Medspa Franchises. Most doctors don’t want to be a “Franchisee” so franchises are using “Licensee” or the ever popular “Business Partner” as terms to get around using Medspa Franchise. But franchise law states that if you: take royalties of any kind, provide the use of names and marks, and provide any ongoing support… you’re a franchise and subject to franchise law no matter what you call yourself, period. There are a number of “licensing” guys out there attempting to circumvent franchise law and calling their offering a “medical spa license”, but if you’re receiving the three items listed above, you’re a franchise.)

Medspa Franchise Business Models: Lets take a peek at how medical spa franchises are currently built.

Sona Laser Clinics:

On first blush, Sona Laser Clinics looks somewhat promising. They’re the “experts in laser hair removal” and are selling medspa franchises like crazy around the country. They specialize in just the one treatment, laser hair removal, (although now offering more) and have low start up technology costs since they utilize a revenue sharing plan.. Best of all, they offer exclusive territories that mean that you’ll be the only Sona center around and don’t have to compete with other Sona clinics in your neighborhood that keep stealing your patients. Let’s look behind curtain number 1.

Sona has problems. Lots of problems. First is that they’re in the business of selling medical spa franchises, not making ongoing revenue for their “business partners”. They actually sold of the medical spas that they personally owned. That touted revenue sharing plan means that as a Sona Franchisee, you’ll be splitting your profits with Sona after your first $50k in income each month. ($50,000 is one hell of a lot of hair removal before you ever see a dime.) Now not all of that first $50k goes to Sona, they require that you spend around $20k a month in advertising to build the name. (Sona Laser Clinics name, not yours.) In addition, while having an exclusive territory sounds good on its face, the real problem is that you don’t. You can’t. And you never will. While you think you have an exclusive territory, every doc from yin to yang is opening up a medical spa and using the coolest new technology while you’re stuck using third tier lasers and don’t have anyone close to help with your brand building efforts. You’re almost literally tied to the mast head and alone in a marketplace where competition is constantly assailing your every effort. Worst of all, Sona’s offering is really limited to laser hair removal by a nurse. (The medical director is available by phone.) One thing is sure in a medspa: Patients want to see a doctor. Here is a list of Sona Medical Spas, Medical Directors.

My personal interactions with Sona Franchise's have been less than inspiring. One franchisee I know has been open for 18 months and never been able to pay himself anything. In another case, Sona Laser Clinics in Utah just closed its doors and walked away. The local television “fraud” reporter followed them out of state, hounding them about all the money they had collected in pre-paid package treatments that would never be fulfilled. The reporter showed the list of complaints from the Better Business Bureau and interview patients who used ‘ripped off’ at least three times during the story. The poor Sona Franchisee was totally trashed and reduced to tears. She comments that it costs them $150,000 more a year than they thought it would to run the clinic and that all the money was gone and the business was bankrupt. Needless to say, the Sona name is buried in that market.

Solana Medical Spas

Now here is a true medical spa franchise. Solana is fairly representative of the run of the mill pure franchise factory. Here’s the pitch. Headquartered in California, Solana offers individuals the ability to participate in the booming medical spa market.

Here’s a direct quote from their site, “Solana MedSpas top franchise Consulting Program offers a unique, turnkey MedSpa Development System that allows medical and non-medical professionals to capitalize on the growing demand for aesthetic medical skin care. You do not need to be in the medical industry to own and buy a med spa franchise!”

Get that last part… No medical experience or credentials necessary. If you have the money, you’re in. How much money? Just $245,000 - $405,000 and you’re in the Botox beautification business baby!

Sonlana Medspas come from the fast talking business world. And I do mean fast talking. John Buckingham is the president of Solana Medical Spas and he really talks fast. Mr. Buckingham has a thoroughly impressive resume; (I do a disservice here because I can’t really remember everything on his resume but be assured its impressive.) Mr. Buckingham’s no dummy either. He’s got a foot in every camp that has anything to do with medical spas. Here’s part of Mr. Buckingham’s resume: “Buckingham is a founding board member of the International Medical Spa Association and serves as their vice president of corporate affairs. He is also co-creator with the University of California, Irvine of their new Spa and Hospitality Certificate Program. Prior to joining Solana MedSpas, Buckingham was Chancellor and President of the Brooks College System, headquartered in Long Beach, Calif. Buckingham holds a Bachelor of Science in Pharmacy with distinction from Purdue University and a Master's in Business Administration from Harvard Business School.”

Of course, one of the things that omitted from his current resume is that Solana wasn’t Mr. Buckingham’s first medical spa franchise business. Nope. Mr. Buckingham was brought into the medical spa franchise business as an employee of Dr. Mo Biring, who happened to run the heart and lung transplant unit of Cedars-Sinai Medical Center. Dr. Biring had the idea to start franchising medical spas (Healthwest) and brought in Mr. Buckingham to run the business. After a number of setbacks (Which included being shut down by the State of California for selling medical businesses to non-physicians.) Mr. Buckingham took the business plan and some key personnel, changed the name from (Solare Medspas? Now Inaara Medical Spa Franchises) to Solana Medspas and set up shop in competition with his former boss. While you never know what has caused or contributed to decisions in the past, that kind of story is one that raises some questions.

Since that time Solana Medical Spas has changed their business model to skirt franchise law. They now take your money and offer ongoing support, but they removed their 'marks and names' portion of their offering. What does that mean? It means that all of their medical spa franchise clients use their own names and aren't part of a larger marketing pool. Exactly what you're buying a franchise for! Who would want to buy a McDonalds franchise if you had to name it Fred Burger and compete as a company of one?

Solana Medspas offers the stock and trade of standard medical spa franchises. Turn key solutions and the big four medspa procedures that are referred to as “low hanging fruit”, Botox, fillers, IPL fotofacials and the ever popular laser hair removal.

Solana has gone to great lengths to look attractive to potential medspa franchises. Lots of impressive charts and graphs, Vice-Presidents galore with long resumes and corporate background. If you sit through one of their franchise discovery day, you’ll find yourself surprised that any other medspa business even exists in the face of such collective business acumen.

So how much does cost to get into Solana Medical Spa Franchises? $80,000 Management Consulting Fee with a minimum investment of $400,000. They'll want you to list your personal assets here.

But Solana Medspas not alone.

American Laser Centers (Advanced Laser Clinics)

 

American Laser Centers another twig on the medspa franchise bush with a different model than Solana. American Laser Centers have a number of company owned stores as well as a medical spa franchise. They also had a 'medical spa licensing program' (not currently working) that charges a flat rate each month rather than a percentage of sales so that you’re “not penalized for success” (A particularly great line reminiscent of ‘death tax’.)

ALC was actually one of the first in the laser hair removal game and achieved a number of early successes attributable to their rapid roll-out and co-location with existing clinics. Their company owned method is to open a clinic “inside” an existing medical practice and “rent” the space from the doc. The doctor feels great about this arrangement since he’s making $4000 a month in rent he wasn’t seeing before and there is increased patient flow. Everyone’s happy. (Note: I can't find a link to the Advanced Laser Clinics licensing program and it may be that they've discontinued it. I'll update later.)

What’s wrong with this picture? Let’s start with the operational setup. American Laser Centers typically staff 3-4 young women who’s average age (at a guess) is 23-24. These staff members run the day to day operations, do the treatments, and collect the money. Where’s the trouble? First, these are employees who end up with a steady stream of cash flowing through the front desk. When you have staff making $9 an hour running a business making $40-60k a month, you have a recipe for all sorts of unwanted goings on. Pocketed cash, treatments after hours, friends and family deals, etc.

American Laser Clinics tries to mitigate these possible scenarios by constant (3 times a day) phone calls with their clinics, but since there is no real “on-site ownership” at each location, problems can and often do arise. Other than the loss of income, there is another serious downside. It’s the location physicians medical license that’s on the line. The ramifications to this type of potential abuse for the physician are serious in the extreme. It’s the doc’s medical licence that’s at risk if something goes wrong.

But ALC has another problem. It’s the doctor satisfaction problem. For company owned laser clinics / medical spas, (those co-located inside and existing practice), you have a situation where ALC is running a $40k< a month operation with three twenty-something’s right under the physicians nose. The doctor is watching everything that’s going on and something occurs to him/her. “Hey, I’m getting $4k a month… but, it’s my butt that’s on the line if something (anything) goes wrong, and it really doesn’t look that hard. If these twenty year olds can run this place, surely I can.”

The result is physicians that become unsatisfied with the program and end up seeking a way to get ALC out and start up their own operation. ALC counters this with heavy non-compete clauses in their contracts. This prevents some docs from acting but leaves a bitter taste.

Strike Three for the Medical Sp Franchise Model: The ‘flat fee’ franchise system for ‘everything you need’.

Now this kind of stuff can really sound good to a hungry doc. No percentage of sales that’s constantly eating into income. Great. But there’s a hidden problem that mirrors that Sona “revenue sharing” conundrum. Since flat fee medical spa franchises are taking only $1,500 a month or so as a flat fee, they have neither the inclination or the income stream to make helping you a priority. It’s just not profitable enough to do so. It’s kind of like buying a “how to start your own medical spa business plan” on the web. i.e. mostly hope. What you’re really purchasing for that monthly fee is a set of 5 cd’s that promise to give you the now famous turn-key solution. What’s on these cd’s? Forms and telephone scripts for the most part. There are also some poorly executed advertising slicks that you can drop your own phone number in and some baubles and trinkets. They could easily fit everything on one cd but of course packaging is everything and who wants to pay $18k every year for life for one cd?

Conclusion: None of this means that businesses selling medical spa franchises are unethical or that there aren't consultants that work hard for their clients and have the best intentions. But whenever you have an industry or market that's exploding the way that medical spas are, you're going to be faced with a 'wild west' situation in which leaders are not clearly defined and 'caveat emptor' is the word of the day. In a new and growing market you will be faced with potential and opportunity, buy also with opportunity cost and the potential that a single wrong choice at the beginning will hamper your success if not sink your venture.

*Tagged as

Want to comment on this post? Click the 'comment' tag below..